BSP chief sees 2023 inflation back within target band

The Philippine central bank expects inflation to fall back to within its 2%–4% target band next year, from a projected average of 5% this year, its governor said on Friday, reiterating that further interest rate hikes this year are possible.

Speaking at a business forum, Bangko Sentral ng Pilipinas (BSP) chief Felipe M. Medalla said the BSP was set to lower its average inflation forecast for 2023 from 4.2%. He did not specify a figure.

Mr. Medalla said on Thursday the BSP was ready to use the “full force” of monetary policy measures to combat inflation and support the peso currency after the US Federal Reserve hiked rates further this week by 75 basis points.

Earlier this week, Mr. Medalla also signaled the prospect of a rate hike at its Aug. 18 meeting, but possibly not by as much as 75 basis points.

“Maybe, depending on the data, (there will be) more policy rate adjustments even before the end of the year,” he said on Friday at a forum organized by the Manila Times newspaper.

“Of course it’s also possible not to have them because the data may go one way or the other.”

The BSP’s key reverse repurchase facility rate is currently at 3.25%, after three successive hikes totaling 125 basis points between May and July, including an off-cycle increase of 75 bps on July 14.

Mr. Medalla also said the peso-dollar exchange rate will continue to be “flexible” and driven by market forces.

The governor said a day earlier the BSP was prepared to “manage spillover effects” from higher U.S. rates, including the weakening of the peso, which if left unchecked could help push prices higher. — Reuters